J.W. O’Donovan recently advised vendors in the sale of significant controlling interests from leading healthcare and technical recruitment specialists, PE Global, to investment holding company, Bakhchysarai Ireland Limited (BIL).
Ray Shanahan and John Fuller acted for the shareholders in PE Global in relation to their sale of a significant controlling interest in the Company to BIL. David Pearson also provided advices in relation to the employment law aspects of the transaction.
BIL was set up in 2018, to facilitate the management buyout of Brightwater Recruitment Group. PE Global currently employ about 60 people in Dublin, London and Cork and will continue to operate as an independent business.
This article first appeared in the Irish Examiner on 18th January 2020.
As 2020 begins and new year’s resolutions are set, there will be many taking the first steps to owning their own home.
The prospect of buying a house, whether you are a first-time buyer, trading up or downsizing can be both daunting and exciting. Many people are uncertain of the details of the process and the order of events.
While each transaction will have its own nuances and peculiarities to be addressed, there are several legal and financial steps that are common to every purchase with a mortgage via private treaty (offers made through an auctioneer and not a purchase at an auction).
Identify and secure the right property at the right price
The first step is, of course, to identify your budget, taking into consideration all your savings and earnings. It’s important to also take into account all possible fees that may come up throughout the entire process.
Once you know how much you have to spend, you can then begin house-hunting for a suitable property.
Pay a refundable booking deposit to the auctioneer
This is a holding deposit only and a gesture of good faith. It should mean the property will not be actively marketed while you carry out due diligence in respect of the legal elements, surveys etc. This agreement will not be binding until the contract is signed by you and the vendor of the property
Instruct a solicitor to act on your behalf
Ensure it is someone you can have confidence in and relate to. Cheapest isn’t always the best! Your solicitor should provide you with a budget for the purchase that includes the fees, costs and outlays (e.g. stamp duty and land registry fees) which you will incur if you proceed with buying this property.
Organise a survey of the property
A survey should be carried out by a suitably qualified engineer with appropriate professional indemnity insurance. The engineer should also be asked to check the boundaries and, in particular, that the boundaries on the ground are accurately reflected in the title map. The engineer should also be asked to carry out a planning search and advise you of any relevant matters before you commit to a contract.
Secure a formal loan sanction
Be aware of the terms under which the bank will lend you the funds to complete your purchase. Usually, conditions include life insurance, fire cover and home insurance valuation.
Your solicitor will carry out due diligence once they have received the contract from the vendor’s solicitor. The due diligence will include the following and a report is to be provided to you as the purchaser; (a) investigation of the title and whether it is leasehold or freehold and report any relevant consequences; (b) advice on planning in conjunction with the surveyor’s report; (c) investigation of access and services (i.e. water/sewer) at the property; (d) review of relevant property taxes, including local property tax (LPT) and non-principal private residence charges; (e) review and advice on any special conditions in the contract for sale.
Signing the contract
Only once you are satisfied with all of the above will you be in a position to commit to the contract. This process usually takes around four weeks from the payment of the booking deposit. On signing the contract, a 10% deposit is payable less any booking deposit already paid. The vendor then counter signs the contract at which point it becomes binding and the completion date is agreed, which is usually two to three weeks after.
Drawing down the loan
Your solicitor will attend to the drawdown of loan funds and provide a statement of account for you to provide the balance, including stamp duties, land registry fees and costs.
Getting the keys
On completion, your solicitor pays over the balance of funds in return for the title deeds and the keys. You can then look after the transferring of utilities, e.g. organising your electricity, gas and broadband.
Registering the title
Your solicitor will attend to stamping and registration of title and mortgage. Once the registration process is completed, the deeds will be returned to the bank who will hold the deeds during the term of the loan.
While the above is a simplified guide, we hope that it allays some concerns and queries. Difficulties can arise at any stage of this process. However, if you are organised and have trusted advisors on hand, you can ensure that you purchase your new home with minimal stress and worry.
In our last blog in this series, we highlighted the key elements of a Heads of Terms including the provisions covered and whether it is legally binding. In this article, we will review the advantages and disadvantages of using Heads of Terms.
Some of the advantages of using Heads of Terms are:
Recording of milestones
Getting to the point of an agreed Heads of Terms can be a major milestone on what might or might not have been a long road of negotiation and discussions between the parties, and can be useful to effectively move onto the next phase.
If the Heads of Terms are partially binding, parties can introduce binding commitments at an early stage in the transaction e.g. provisions relating to confidentiality (if there is no separate confidentiality agreement), exclusivity or lock-out undertakings and the treatment of costs.
Setting out of key commercial terms
A Heads of Terms can be useful for setting out parties’ understanding, particularly on complex issues such as pricing models and can help focus the negotiations and highlight major issues at an early stage.
Some of the disadvantages of a Heads of Terms are:
If not properly drafted what one party might have considered to be non-binding may end up being used against them as a binding term. If the parties do not want the Heads of Terms to be binding, this should be expressly stated.
Time and resources
The time taken to negotiate Heads of Terms can be disproportionate to the benefit. If the parties intend to sign a full contract in due course, consider whether the parties have sufficient time and resources to negotiate the Heads of Terms and if so, whether they are prepared to dedicate those resources to work on the Heads of Terms.
Expiry of Heads of Terms and contractual vacuum
If Heads of Terms are binding, there should be clear provisions about what happens when they expire. Failure to agree this will leave a contractual vacuum and cause uncertainty over whether there is a contract in place and, if so, on what terms.
Where parties prepare Heads of Terms in an inappropriate manner, and without legal advice, the document prepared has the potential to cause more harm than good. Any ambiguity can cause uncertainty over the exact nature of the relationship between the parties. There can be doubts over whether or not the parties had intended to be legally bound by the whole document or by particular terms within the document. Most uncertainties can be eliminated or at least reduced by clear drafting.
If you would like more information on this topic or any other of the topics in our series on Mergers and Acquisitions, contact:
In our third and final article on the topic, we will look at the roles of some of the parties involved in the Mediation process. For previous articles in the series, click here for our overview on the advantages of Mediation and here for more on why the Mediation Act is welcome.
Role of Mediator
Section 8 of the Mediation Act 2017 places the following obligations on the Mediator during the Mediation process:
Declare any conflict of interest which they become aware of during the course of the Mediation and, unless the parties agree otherwise, cease to act in such circumstances
Act with impartiality and integrity and treat the parties fairly
Complete the Mediation as expeditiously as is practicable, having regard to the nature of the dispute
Ensure that the parties are aware of their rights to obtain advise (including legal advise) prior to signing any Mediation Settlement
The Mediator shall not make proposal to the parties to resolve the Dispute as Mediation should be determined by the agreement of the parties, unless otherwise requested
Role of the Court
Part 4 of the Act deals with the role of the Court in Mediation. Section 16 provides that a Court may on the application of a party or on its own motion invite the parties to consider Mediation and provide the parties with information about the benefits of Mediation to settle their dispute.
Following an invitation by the court where the parties to decide to engage in Mediation, the Court may:
Adjourn the proceedings
Make an Order extending time for compliance by a party with Rules of Court or with any Court Order; or;
Make such other Order or direction, as is necessary to facilitate the effective use of Mediation
Section 17 goes on to say that following an invitation by the Court under Section 16(1), the parties to the proceeding do engage in Mediation and, afterwards, then apply to the Court to re-enter the proceedings, the Mediator is obliged to submit a written report to Court setting out:
If the Mediation did not take place, the reasons why it did not occur or;
Where the Mediation did take place, a statement as to whether or not a settlement has been reached and if so, a statement of terms of this settlement. A copy of this report must be provided to each party at least seven days prior to its submission by the Mediation to the Court.
Whilst the mandatory nature of these provisions may be considered to conflict with the confidential and voluntary nature of Mediation, such reports will likely be drafted in such a manner as not to disclose any confidential material. The Law Reform Commission had recommended that any such report should be limited to a neutral summary of the outcome.
Under Section 21 of the Act, a Court may now have regard to any unreasonable refusal or failure by a party to consider or attend mediation. This means that any party who refuses to mediate are at risk of having to discharge the costs incurred by the other side.
This would appear contradictory, given the voluntary nature of mediation and that parties should not be forced into mediation where they are unwilling to do so. It remains to be seen how the Courts will interpret this part of the Act, particularly in disputes involving debts due and owing. There is also no provision for a party or indeed the Mediator to advise the Court of a party merely attending as a box ticking exercise.
Bullying and harassment claims are now heard since 2018, in the Personal Injuries list in Dublin (as opposed to the non-jury list). The relevant Practice Direction says nothing about Mediation.
However, the Legal Diary now in addition states as follows;
“HC76 NOTICE With effect from Trinity Term 2018 the following arrangements will apply to Personal Injuries Actions arising from allegations of bullying and or harassment. Upon application for a trial date before either the Deputy Master or the Judge in charge the case must be identified as one arising from such allegations. No case shall be listed for trial unless and until the parties have been to Mediation save for good reason.”
This does not confirm who should pay the Mediator’s fee (and what happens if one party cannot do so) except that now the Court will not list it for trial “unless and until the parties have been to Mediation save for good reason”. Again, this direction appears to go against the voluntary nature of Mediation.
Role of the Mediation Council
Section 12 provides for the potential establishment of a Mediation Council to oversee the development of the Mediation sector. The intention appears to be that the Council would represent the interest of the Mediators and the public interest, and the Minster may declare such body to be the “Mediation Council of Ireland”. This body must be sufficiently representative of the Mediation interests and also meet minimum requirements provided for in the Schedule of the Act. Such a Council would likely become the regulation for the Mediation sector; however, it remains to be seen whether such a Council will be established and how it will be funded.
For more information on the Mediation process, contact:
The third in our series on the practical aspects of running a successful mergers and acquisitions transaction, this article looks to highlight the key elements of a Heads of Terms. Please see our news section here for other publications in the series.
What is a Heads of Terms?
When entered into, in the context of a share sale and purchase, a Heads of Terms (which can also be referred to as a Letter of Intent, Memoranda of Understanding or Term Sheet), is entered into relatively early in the transaction for the purpose of the parties recording:
a) The main terms of a preliminary non-binding understanding, intended to lead to a binding contract or series of contracts for an entire project or transaction.
b) An agreement to set out the key terms of a transaction, which contains some binding terms and some non-binding.
c) The terms of a preliminary binding agreement, again intended to deal with certain preliminary matters prior to the signing of a contract to cover the whole project or transaction.
2. Is it legally binding or not?
Above we mention the fact that a Heads of Terms can be non-binding, partly binding or entirely binding with additional terms. The answer to the question therefore invariably depends on what the parties have agreed to at the outset but in the majority of cases we would find that a heads of terms contains only some provisions which are agreed to be binding by both parties. That brings us to the next question.
What provisions are covered in a Heads of Terms?
A standard heads of terms will generally contain provisions including but not limited to:
a) Commercial Terms
This will set out the overall agreement between the parties. For example Investaco Limited intends to acquire 50% of SellCo Limited for a price of €10m subject to completion of financial, legal and commercial due diligence.
b) Time Limits
A deadline for completion of the transaction and execution of a binding Share Sale and Purchase Agreement would generally be included, as well as confirmation of the timelines relating to completion of due diligence.
It might be necessary to set out any pre-conditions to completion such as the approval of the Competition and Consumer Protection Commission, consent of existing customers or secured creditors, or even the conclusion of a commercial agreement by the target company with a new customer without which the deal may not be commercially viable for the purchasing company.
Where a separate Non-Disclosure or Confidentiality Agreement has not been entered into then it is usual for the Heads of Terms to contain a binding confidentiality clause with mutual restrictions on both parties, as in most cases confidential information is likely to be exchanged by both parties.
This is usually a binding provision in the Heads of Terms as the Purchaser will want to ensure that the seller is not at the same time using their bid to attract another buyer at a higher price, potentially wasting the buyers time and resources. The exclusivity clause would generally be limited to a specified time period so as to ensure the buyer has an incentive to complete their due diligence in as an efficient manner as possible.
f) Transaction Advisor Details
Details of the advisors appointed by each party including financial and legal.
A provision setting out that each party will be liable for its own costs, or where the parties agree that one party would be responsible for the costs of a portion of or all of the other parties costs in particular circumstances.
h) Jurisdiction and Governing Law
This is not an exhaustive list and every heads of terms will be different in its form and content.
This is a just a flavour of the content of a Heads of Terms which can be as simple or as complex as the parties require. As stated above it is generally the pre-cursor to a more complex and biding agreement to follow with care required to ensure that the parties don’t commit to a binding agreement where this was not intended.
In the next article, we will look at the advantages of using heads of terms.
If you would like more information on this topic or any other of the topics in our series on Mergers and Acquisitions, contact:
J.W. O’Donovan Partner Patrick Bradley, has been appointed as Chairman of the Probate and Trusts Committee of the Law Society of Ireland, which monitors and advises its members on best practice in this area as well as making representations on behalf of the Society to relevant stakeholders.
Patrick practices in estate planning, probate and tax law along with commercial and property law. He has extensive previous experience of lecturing at the Law Society, as well as the Institute of Taxation, and is a member and past Chairman of the Law Society’s Taxation Committee.
Last week, the J.W. O’Donovan team welcomed guests to our Winter Wine-tasting event in the beautiful surroundings of St. Peters.
Guests were greeted with a drinks reception, with music from an instrumental swing jazz trio before a fascinating masterclass by wine expert Beverley Mathews of l’Atitude 51. Beverley shared her tips on how wines can be identified, which we put to the test for the next part of the evening – speed wine-tasting. Attendees moved from table to table, tasting and debating, with the aim of identifying all six wines. One skilful taster, Cathy Fennessy, identified the most correct answers, winning two bottles of wine.
Our sincere thanks to all of those who came along.
Free Pic No Repro Fee 14 November 2019
JW O Donovan
Pictures Gerard McCarthy 087 8537228
More Info contact Ciara Flaherty
Springboard PR & Marketing
Free Pic No Repro Fee 14 November 2019
JW O Donovan
Pictures Gerard McCarthy 087 8537228
More Info contact Ciara Flaherty
Springboard PR & Marketing
Obligations for solicitors to advise Clients on Mediation
The Mediation Act 2017 imposes new obligations on solicitors, including a statutory declaration. Under the Act, practising solicitors are required, prior to issuing proceedings on behalf of a client, to do the following:
Advise the client to consider mediation as a means of attempting to resolve the dispute
Provide the client with information in respect of mediation services, including the names and addresses of persons who provide mediation services
Provide the client with information about the advantages of resolving the dispute otherwise than by way of the proposed proceedings, and the benefits of mediation
Advise the client that mediation is voluntary and may not be an appropriate means of resolving the dispute where the safety of the client and/or their children is at risk
Inform the client of the matters concerning confidentiality and enforceability of mediation settlements as set out in the Act
Section 14(2) provides that the originating document by which proceeds are instituted shall be accompanied by a Statutory Declaration made by the solicitor evidencing (if such be the case) that the solicitor has performed the obligation under Section 14(1) in relation to the client and the proceedings to which the Declaration relates.
While it may be thought that the mandatory nature of the provisions of Section 14 are somewhat incompatible with the Solicitor and the client having to consider when is the appropriate time to consider Mediation, having regard to the nature of the proofs available to the parties, the section does little more than oblige Solicitors to provide minimal advices to the client.
The Section clearly also applies to debt collection litigation.
Mediation Settlements can now be legally binding
We now have clarity about achieving a legally binding agreement in mediation. Any party to the mediation now has the right to decide if a legally binding agreement is required, drafted by the mediator, as an outcome of mediation. This is given statutory footing by Section 11 of the Act. Subject to this, a Mediation Settlement, as a compromise, “shall have effect as a contract between the parties”, save where it is expressly stated to have no legal effect until it is incorporated in a formal legal agreement or contract to be signed by the parties.
Limitation Periods are now extended
The Act extends limitation periods by the period commencing on the day on which the agreement to mediate is signed (presumably meaning the date on which all parties have executed) and ending on the day which is thirty days after either a mediation settlement is executed or the mediation is terminated. The mediator is obliged to inform the parties in writing of the date on which the mediation ends.
The statutory obligation now placed on solicitors to advise clients on Mediation has resulted in an increase in the number of Mediations and the demand for Mediators. The Act has provided solicitors and clients with a practical and cost-effective solution to deal with disputes quickly whilst avoiding the potential public exposure which can occur when litigating through the courts. Mediation will not be an appropriate resolution for all disputes, however it is a useful tool to consider before the issuing of court proceedings is contemplated.
In our next and final article on this topic, we will look at the role of each party in Mediation. For more information, contact:
This article is the second in a series of publications by J.W. O’Donovan’s Corporate Team on the practical aspects of running a successful mergers and acquisitions transaction. To read the first, click here.
Most people would assume that the starting point for the sale or purchase of a company is the agreement by the seller and buyer of a heads of terms for the transaction. However, there are a number of matters that should be considered at an early stage, even prior to any specific transaction being identified. These include:
Review of Corporate Structure
A business owner who anticipates a sale of its business in the near to medium term should review its corporate structure to identify the target entity. It may be appropriate for any aspects of the business that would not form part of the sale to be ‘hived-off’ into other structures. Many long-established businesses have complicated group structures due to previous events such as management buy-outs. It may be advisable to simplify these by striking off or winding up dormant companies or merging subsidiaries with their holding companies.
Tax Planning Considerations
It is critical that a business owner considers the potential tax arising on a sale of the business long before any sale is likely to occur. There are reliefs available but the criteria can be quite technical and specific advices should be obtained to ensure that such reliefs are availed of, to the maximum extent possible. An example might be where the owner’s spouse works in the business – if he or she is appointed as a director they may qualify for entrepreneurial relief or retirement relief on a sale of shares; such shares can be transferred between a husband and wife without any tax arising.
Aside from the personal reliefs that may be available on a sale of a business, many business owners are now choosing to hold a portion of their shares through a personal holding company as that holding company would be able to avail of an exemption from capital gain tax on a sale of such shares.
In order to qualify for some of the available reliefs, it may be necessary for the relevant structure to have been in place for a number of years prior to a sale. It may also be necessary to move any non-trading assets outside of the group (a ‘hive-off’ as described above).
Vendor Due Diligence
One of the first steps that a buyer will take in a transaction will be to commence a due diligence exercise to examine the financial, operational and legal aspects of the target business. Significant issues identified in due diligence can result in indemnities being sought from the seller or a renegotiation of the commercial terms of the transaction. As a result, it can be advisable for a business owner who anticipates a sale to carry out its own ‘vendor due diligence’ exercise so that any issues in the business can be identified and remedied prior to a transaction commencing.
This exercise would cover matters such as:
review of internal financial reporting. If adequate management accounts and other financial records are not available it can make it difficult to justify a valuation when negotiating with a buyer,
review of commercial agreements to identify gaps in documentation, expired contracts in need of renewal and change of control clauses allowing the other party to terminate in the event of a sale of the business,
review of internal processes such as health and safety and data protection compliance,
review of employee contracts and policies to ensure all employees have been issued with a contract or memorandum of terms of employment and that each employee has received their legal and contractual entitlements.
Even if an anticipated sale does not materialise, the business will be on a better footing as a result of carrying out this internal review.
Finance & Target Identification
On the buyer side, before engaging with a seller it is advisable to ensure that the necessary finance to carry out an acquisition is available. In recent years, a number of alternative lenders have entered the Irish market and have provided the finance for acquisitions. However, their requirements can be different from those of the pillar banks and it makes sense to engage with all potential lenders at an early stage in order to establish if they will be a good fit.
A buyer may also want to spend some time identifying potential targets in the relevant market and assessing their suitability for acquisition. Gaining a detailed understanding of the benefits that would result from a proposed acquisition in terms of potential synergies and efficiencies and growth in market share can be very important in ensuring a transaction is approved internally and in obtaining sanction from external lenders, where applicable.
Both the seller and buyer will need to select advisors with the appropriate expertise to ensure their interests are represented and the transaction runs as smoothly as possible. For the seller in particular, firms that previously provided legal and financial services to the business may not have experience in large transactions and it may be necessary to appoint new advisors for the purpose of carrying out the transaction. In such event, it is important to ensure that the existing advisors work closely with those taking the lead on the transaction to pass on their relevant knowledge regarding the business.
Most large accountancy firms will have in-house tax advisory services but, in some instances, a separate tax advisor may be required. Furthermore, in some instances, minority shareholders may choose to take independent legal or tax advice.
In our next article in the series, we will cover the preparation of the heads of terms for a transaction.
Mediation is now a central element in dispute resolution architecture. It is a flexible process conducted confidentially in which Mediators quickly and expertly help people in conflict to reach their own agreement together. Mediation was historically only used in Family Law issues. However, the commencement of the Mediation Act 2017 has resulted in an increased awareness and willingness by the judiciary to look to Alternative Dispute Resolution in appropriate circumstances.
The Mediation Act 2017, which commenced on 1st January 2018, provides a statutory framework to promote the resolution of disputes through mediation as an alternative to court proceedings. The underlying objective of the Act is to promote mediation as a viable, effective and efficient alternative to court proceedings, thereby reducing legal costs, speeding up the resolution of disputes and reducing the disadvantages of court proceedings.
Certain types of disputes have been excluded, for example: – Arbitration, disputes which fall under the jurisdiction of the Workplace Relations Commission and Judicial Review proceedings.
Mediation in General
Section 6 sets out the relevant principles governing Mediation:
The parties may engage in Mediation as a means of attempting to resolve the dispute
Participation is voluntary
The existence of proceedings does not prevent the parties engaging in Mediation
Any party may withdraw from the Mediation at any time (including the Mediator)
A party may be accompanied to the Mediation and assisted by a person who is not a party to or obtain independent legal advice at any time during the Mediation
It is for the Parties themselves to determine the outcome of the Mediation and the fees and costs of the Mediation shall not be contingent on its outcome
What are the advantages of Mediation?
Speed: Mediation offers a way to avoid the courts and seek an earlier agreement quicker rather than litigating through a congested courts system.
Cost Effective: The costs associated with resolving a case through mediation are generally substantially lower than costs associated with progressing cases through the courts. The costs are usually shared between the parties.
Confidentiality: Mediation is a private, confidential process which can benefit commercial entities who are seeking to protect their business and reputation during disputes. Accredited mediators are bound by confidentiality and either side of a dispute are only bound to disclose information voluntarily during mediation, whereas there is less disclosure control and more public exposure in a court setting.
Offers greater level of control: Mediation offers the ability for both parties in a dispute to maintain a greater sense of control over the process and settlement. Mediators are also able to explore more creative solutions to disputes, and aim to seek a mutually satisfactory outcome. A court setting normally results in a judge imposing a settlement on the parties involved.
Seeks a mutually-agreeable solution: Business relationships and reputations are critical to maintain. Finding a mutually-acceptable resolution to a dispute – particularly where a business relationship is expected to continue following that dispute – is a must for many and mediation offers this potential outcome. A collaborative approach to resolving a dispute can ameliorate any ill will in the relationship, whereas a court-imposed settlement often leaves one party aggrieved.
In our next article on this topic, we will look at the advantages of the Mediation Act 2017. For more information, contact: